February 2021 “Price Vortex” Event
Pipelines throughout the Midwest began issuing operational flow orders with most to become effective February 13th forward. Those flow orders required Morton to buy gas to cover your daily gas needs under the strict limits of those flow orders or receive penalties from the pipelines for not providing the amount of gas consumed within those strict limits. The temperatures for the time frame of Feb. 13th to approximately Feb. 21st on which date most pipelines lifted the operational flow orders, were at/near record lows for both the high temperature and the low temperatures for many of those days. Since temperatures were extremely low, significantly more gas was required to be put on the pipeline not only for anticipated needs, but to prevent costly penalties being assessed by the pipelines. In many cases these penalties can be both hourly and daily and can be multiples of the daily price as noted in the trading publications Gas Daily and Natural Gas Weekly. Polar vortex events have happened in the past, most recently in 2019 and before that in 2014. These events are not uncommon and have not had a significant impact on gas prices until this event. This polar vortex was extreme both in the amount of land covered and the duration of the polar vortex…potentially very similar to one that occurred in winter 1983.
The key difference between ALL prior polar vortex events and this one is the price of gas for this event. This is where it gets interesting. Most “day ahead” market trades are made via ICE which is a trading platform for natural gas. The Village’s suppliers may obtain some, if not all, incremental gas via this trading platform and are therefore at the benefit or in this case the mercy of the pricing on the platform. The traders pushed prices to record highs on multiple pipelines throughout the Midwest…in the past a polar vortex price for a given day may double or some price close to that. In this instance some of the prices for our customers gas purchases went to 100 times the first of the month price of approximately $3.00 per dth! This is purely and simply price gouging at its very worst. Luckily these prices only apply to the incremental gas quantities needed to cover the gas needs for vortex temperatures and the pipeline operational flow orders which limits the damage significantly. Unfortunately, until this can be corrected via legal and legislative means some of those incremental costs will be passed on to the customers at some point. We will do our full level best to minimize the impact and defer costs where possible. Investigations are already under way from legislators from all levels of government from local to the federal level and potentially multiple agencies. There are anti-profiteering laws in many states to prevent consumers from being taken advantage of and our gas manager, Utility Gas Management, along with the numerous cities and potentially other parties impacted will exercise all legal remedies to recover damages owed to you, but as you know this will take time. There is absolutely no justification for a cost increase of this magnitude. It is appalling and all efforts will be exhausted to make sure those who are responsible are not only brought to justice, but pay for damages along with any other potential civil or criminal penalties that can be assessed.
It is important to note that you, the citizens, by turning back your thermostats when requested to do so greatly reduced the amount of gas purchased at these what we consider illegal prices thereby saving thousands of dollars in additional costs. Thank you for your efforts and know that we will do everything possible to recover every dime in overcharges.
Jeffrey L. Kafuman
President
Craig M. Loudermilk, P.E.
Director of Public Works
